When it came to managing their assets, it was obvious that simplicity was not the name of the game for Mr. and Mrs. Jackson. With eighteen million dollars invested in fourteen separate brokerage accounts and one revocable trust, keeping track of their finances was no easy task. Their various portfolios held a multitude of securities in small quantities that were concentrated in only two sectors, including many weakly performing spin-off companies. The Jacksons were interested in managing risk, yet their portfolio actually had higher risk and lower performance averages than the market averages. In addition, their bond portfolio had several issues that were not investment grade and paid a below-average rate of return. Simplified money management was clearly one of their main objectives. However, the Jacksons stressed that socially responsible investing was equally important.
What Strategies Helped?
The first thing the Jacksons needed to do was to consolidate all of their accounts into one portfolio. This instantly improved the decision making process for selecting stocks and bonds and enabled them to see which securities actually adhered to their standards for socially responsible investing and which did not. Next, a strategy was developed to gradually move the overexposure of value stocks into more growth issues to create a more style neutral portfolio, and to selectively increase exposure to those sectors in which they were not invested, improving long-term performance potential and reducing risk.
The Jacksons also had $4 million sitting in a money market account. By investing some of that cash in more suitable investments, such as attractively priced stocks, the Jacksons enhanced their return potential. At the end of the day, the Jacksons found themselves with a stronger, safer, consolidated investment portfolio that met their needs for socially responsible investing.
This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. Investors should seek financial advice regarding the suitability of any investment strategy based on their objectives, financial situations, and particular needs. This article is not designed or intended to provide financial, tax, legal, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.